Thursday, the European Central Bank cut its benchmark interest rate to a new low and unveiled additional support measures as the 16-nation economy faces its worst recession since the World War II. Meanwhile, the Bank of England left its key interest rate unchanged and increased the size of its asset purchase scheme.
At its meeting in Frankfurt, the Governing Council, the policymaking body of the ECB, reduced the interest rate on the main refinancing operations of the Eurosystem by 25 basis points to 1.00%, effective May 13. The decision was in line with expectations.
In the press conference that followed the announcement, the central bank chief Jean-Claude Trichet said the central bank will proceed with its enhanced credit support approach and will conduct liquidity-providing longer-term refinancing operations with a maturity of 12 months.
Trichet also announced that the central bank will buy euro-denominated covered bonds issued in the euro area. He said the program is expected to be worth around EUR 60 billion. Technicalities will be decided in the next meeting.
While stating that the present level of interest rates was appropriate, Trichet steered clear of ruling out further rate cuts. He noted that the latest policy decisions were taken unanimously.
The Federal Ministry of Economics and Technology said in a report that German factory orders registered an unexpected monthly increase of 3.3% in March, following a revised fall of 3.1% in February. Economists were expecting a 1% decrease.
The French trade deficit widened to EUR 4.88 billion in March from EUR 4.12 billion in February, the Customs Office reported. The shortfall for March was larger than the expected deficit of EUR 3.9 billion.
Statistics Finland said in a preliminary report that the gross domestic product or GDP declined a seasonally adjusted 0.4% month-on-month in February, after falling 2.6% in January, revised from 1.8% drop reported initially. Separately, the agency reported that the number of new motor vehicles registered in April decreased 43.3% year-on-year to 18,139. Also, the number of nights spent by foreign tourists at accommodation establishment declined 15% year-over-year to 360,000 in March.
The Statistical Service of the Republic of Cyprus announced that the consumer price index or CPI rose 0.7% year-over-year in April, slower than the 1.1% increase in the previous month. The agency also reported that the registered unemployed stood at 16,106 persons in April, down from 16,806 persons in the previous month.
The General Secretariat of the National Statistical Service of Greece announced that the consumer price index or CPI rose 1% year-over-year in April, slower than the 1.3% increase in the previous month.
Rest of Europe
The Bank of England left its key interest rate unchanged at 0.5%. Further, the central bank announced that it is continuing with its scheme of asset purchases financed by the issuance of central bank reserves and decided to increased its size by GBP 50 billion to a total of GBP 125 billion.
Switzerland's Federal Statistical Office said consumer prices dropped 0.3% on a yearly basis in April, following a 0.4% decline in March. Economists were expecting an annual 0.6% decrease.
A report from the Czech Statistical Office said the trade surplus stood at CZK23.4 billion in March, higher than the CZK8.69 billion surplus in February and represented the highest trade surplus on record. Economists expected the surplus to be only CZK7 billion.
The Hungarian Central Statistical Office said in a preliminary report that the industrial production fell a working day adjusted 19.6% year-over-year in March, after falling 25.4% in February. Separately, the agency reported that the trade surplus stood at EUR492.8 million in March, representing an increase of EUR279 million from the same month last year. Economists expected the surplus to come in at EUR285 million.
Statistics Sweden announced that the industrial production dropped 22.9% year-over-year in March, marking the same pace as in the previous month. Economists were looking a decline of 21.8%. The agency also announced that the industrial new orders dropped 20% year-over-year in March, compared with a 30.3% fall in February, revised from 30% decline reported initially. Further, Sweden's jobless rate stood at 7.8% in the first quarter, up 1.5 percentage points from the previous year and the activity index, which measures the level of activity in the Swedish economy, declined a seasonally adjusted 0.4% month-on-month in March.
The Icelandic central bank reduced its key policy rate by 250 basis points to 13%. In April, the central bank lowered the interest rate by 150 basis points to 15.5%.
Elsewhere, the Czech National bank reduced its key policy rate by 25 basis points to 1.5%. In March, the central bank had kept the two-week repo rate unchanged at 1.75%. Economists had expected the central bank to hold the interest rate.
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